Maybe God - with his invisible hand -- let the chips fall where He wanted them, following the crisis of '08. Or, maybe Mr. Geithner and his Wall Street cronies got their fat mitts on the loot first.
Everyone - believers and heathen alike - thinks he knows the mind of God, or claims to. Reforestation, recycling, redistribution...and economic recovery! Surely, the Big Man is for them all. Ad then, you let it be known that you favor higher marginal income taxes (on someone else, of course); this puts you on the side of the angels, too. But for all we know, the angels prefer strip mining and flat taxes...and drive down the highway throwing beer cans out the window.
The mind of God, like the future, is unknowable. But that doesn't seem to stop anyone. The former Treasury Secretary's book comes out this week. It's called "Stress Test." As the title suggests, Geithner claims he was tested by the financial crisis in '08-'09. He thinks he passed. And now he's peddling his version of the story, complete with God in his pocket and the future on the teleprompter.
In the autumn of 2008, for example, Mr. Geithner knew what was coming. As his colleague Meg McConnell put it, "there will be shantytowns and soup lines across the country."
How did she know that? Because "panics kill economies," says Geithner.
On the evidence, panics actually help bring economies to life. Like forest fires, they burn off the dead wood. That happened twice in the early 20th century. There was a panic in 1907 and another in 1920. The stock market fell in half between June 1907 and January 1908. The economy retreated too. But by mid-'08 stocks were back to their highs and the economy was booming.
Again, between July 1920 and June 1921, the stock market lost half its value. And again, the feds did nothing. The economy went into a depression, with double digit unemployment and 30% less smoke belching from factory chimneys. Instead of running stimulative budget deficits, the federal government posted a surplus. No TALF, no TALC. No ZIRP. No QE. Despite, or perhaps because of this government neglect, the fire burned hot for a few months. But by the summer of 1921, the tinder was consumed and the flames died out...within 18 months people were back at work.
That was the last time federal firefighters let an economic blaze have its way. Since then, every conflagration has been met with smoke jumpers and water bombs. The Panic of '29, for example, was fought by Hoover...and then by Roosevelt. Together, they dumped so much water on the economy it was soggy for a whole decade.
More recently, Alan "Smokey" Greenspan extinguished the campfires of '87... and 200. Then, it was Geithner's turn.
Yes, it was "messy," he admits. And yes, there were some "collateral beneficiaries" (he doesn't mention himself by name...there was no need to do so). "But this is the only way to ultimately protect the innocent victims of the crisis from the calamitous damage of economic depressions."
St. Timothy to the rescue. Hallelujah.
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.